Income Taxes

The jurisdictional components of loss before income taxes consist of the following (amounts in thousands):



	Year ended December 31,
	2018			2017			2016
Domestic	$	(53,230	)	$	(76,078	)	$	(122,277	)
Foreign	6,127			(3,243		)	(16,846		)
Loss before income taxes	$	(47,103	)	$	(79,321	)	$	(139,123	)

The components of our income tax expense (benefit) consist of the following (amounts in thousands):



	Year ended December 31,
	2018			2017			2016
Current:
Federal	$	(183	)	$	(81	)	$	(219	)
State	586			146			(95		)
Foreign	967			978			1,189
	1,370			1,043			875
Deferred:
Federal	—			(5,417		)	(12,500		)
State	537			143			902
Foreign	1			28			(9		)
	538			(5,246		)	(11,607		)

Income tax expense (benefit)	$	1,908		$	(4,203	)	$	(10,732	)

The difference between the income tax benefit and the amount computed by applying the federal statutory income tax rate to loss before income taxes consists of the following (amounts in thousands):



	Year ended December 31,
	2018			2017			2016
Expected tax expense (benefit)	$	(9,892	)	$	(27,762	)	$	(48,693	)
Valuation allowance:
Valuation allowance on operations	5,885			24,265			38,324
Impact of tax law changes on valuation allowance	(1,692		)	(25,564		)	—
Change in tax rate	1,692			20,147			516
State income taxes	972			339			(3,033		)
Foreign currency translation loss	1,038			599			838
Net tax benefits and nondeductible expenses in foreign jurisdictions	1,412			1,493			407
GILTI tax	634			—			—
Incentive stock options	757			1,297			97
Nondeductible expenses for tax purposes	829			796			386
Expiration of capital loss	—			—			641
Other, net	273			187			(215		)
Income tax expense (benefit)	$	1,908		$	(4,203	)	$	(10,732	)

Income tax expense (benefit) was allocated as follows (amounts in thousands):



	Year ended December 31,
	2018		2017			2016
Continuing operations	$	1,908	$	(4,203	)	$	(10,732	)
Shareholders’ equity	—		—			2,287
	$	1,908	$	(4,203	)	$	(8,445	)

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. The components of our deferred income tax assets and liabilities were as follows (amounts in thousands):



	Year ended December 31,
	2018			2017
Deferred tax assets:
Domestic net operating loss carryforward	$	96,777		$	94,598
Interest expense deduction limitation carryforward	2,495			—
Foreign net operating loss carryforward	9,582			11,619
Intangibles	14,875			18,058
Property and equipment	5,291			9,280
Employee benefits and insurance claims accruals	5,374			5,652
Employee stock-based compensation	3,271			3,753
Accounts receivable reserve	325			284
Inventory	236			295
Accrued expenses	190			—
Deferred revenue	560			316
	138,976			143,855
Valuation allowance	(62,639		)	(59,766		)

Deferred tax liabilities:
Accrued expenses	(419		)	(112		)
Property and equipment	(79,606		)	(87,128		)

Net deferred tax liabilities	$	(3,688	)	$	(3,151	)

As of December 31, 2018, we had $96.8 million and $9.6 million of deferred tax assets related to domestic and foreign net operating losses, respectively, that are available to reduce future taxable income. In assessing the realizability of our deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

In performing this analysis as of December 31, 2018 in accordance with ASC Topic 740, Income Taxes, we assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets. A significant piece of negative evidence evaluated is the cumulative loss incurred during previous years. Such negative evidence limits the ability to consider other positive evidence that is subjective, such as projections for taxable income in future years. Because we are in a net deferred tax asset position, we recognize a benefit only to the extent that reversals of deferred income tax liabilities are expected to generate taxable income in each relevant jurisdiction in future periods which would offset our deferred tax assets.

Our domestic federal net operating losses generated through 2017 have a 20 year carryforward period and can be used to offset future domestic taxable income until their expiration, beginning in 2030, with the latest expiration in 2037. Losses generated after 2017 have an unlimited carryforward period and are limited in usage to 80% of taxable income (pursuant to the Tax Reform Act mentioned below). The majority of our foreign net operating losses generated through 2016 have an indefinite carryforward period, while losses generated after 2016 have a carryforward period of 12 years. As of December 31, 2018, we have a valuation allowance that fully offsets our foreign and domestic federal deferred tax assets. We also have net operating loss carryforwards in many of the states that we operate in. Most of these are filed on a unitary or combined basis. These states have carryover periods between 5 and 20 years, with most being 15 or 20. We have determined that a valuation allowance should be recorded against some of the state benefits through December 31, 2018. The valuation allowance is the primary factor causing our effective tax rate to be significantly lower than the statutory rate. The amount of the deferred tax asset considered realizable, however, would increase if cumulative losses are no longer present and additional weight is given to subjective evidence in the form of projected future taxable income.

We have no unrecognized tax benefits relating to ASC Topic 740 and no unrecognized tax benefit activity during the year ended December 31, 2018. We record interest and penalty expense related to income taxes as interest and other expense, respectively. At December 31, 2018, no interest or penalties have been or are required to be accrued. Our open tax years are 2015 and forward for our federal and most state income tax returns in the United States and 2013 and forward for our income tax returns in Colombia. Net operating losses generated in years prior to our open years and carried forward are available for adjustment and subject to the statute of limitation provisions of such year when the net operating losses are utilized.

Recently Enacted Tax Reform

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”) was enacted. The legislation significantly changes U.S. tax law by, among other things, permanently reducing the U.S. corporate income tax rate from a maximum of 35% to a flat rate of 21%, repealing the alternative minimum tax (AMT), implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries, limiting the current deductibility of net interest expense in excess of 30% of adjusted taxable income, and limiting net operating losses generated after 2017 to 80% of taxable income.

As a result of the reduction in the U.S. corporate income tax rate, we revalued our ending net deferred tax assets at December 31, 2017 and recognized a $20.1 million tax expense in 2017, which was fully offset by a $20.1 million reduction of the valuation allowance.

Due to the repeal of the AMT, for the year ended December 31, 2017, we reduced the valuation allowance by $5.2 million to remove the effects of AMT on the realizability of our deferred tax assets in future years. In addition, we reversed the valuation allowance on the AMT credit carryforward of $0.2 million that will now be refundable through 2021 and has been reclassified from a deferred tax asset to a noncurrent receivable.

Territorial Tax System — To minimize tax base erosion with a territorial tax system, beginning in 2018, the Tax Reform Act provides for a new global intangible low-taxed income (GILTI) provision. Under the GILTI provision, certain foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets are included in U.S. taxable income. We are now subject to GILTI, and we have elected to treat the GILTI tax as a period expense rather than to provide U.S. deferred taxes on foreign temporary differences that are expected to generate GILTI income when they reverse in future years.

Limitation on Interest Expense Deduction — The new limitation on interest expense resulted in a $11.4 million disallowance for the year ended December 31, 2018; however, this adjustment is offset fully by our net operating loss carry forwards. The disallowed interest has an indefinite carry forward period and any limitations on the utilization of this interest expense carryforward have been factored into our valuation allowance analysis.

Limitation on Future Net Operating Losses Deduction — Net operating losses generated after 2017 are carried forward indefinitely and are limited to 80% of taxable income. Net operating losses generated prior to 2018 continue to be carried forward for 20 years and have no 80% limitation on utilization.

Mandatory Repatriation — The Tax Reform Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits through the year ended December 31, 2017. Because we had an accumulated foreign deficit at December 31, 2017, we did not record a tax liability from the mandatory repatriation provision of the Tax Reform Act. We do not intend to distribute earnings in a taxable manner, and therefore, we intend to limit any potential distributions to earnings previously taxed in the U.S., or earnings that would qualify for the 100% dividends received deduction provided for in the Tax Reform Act. As a result, we have not recognized a deferred tax liability on our investment in foreign subsidiaries.

International Tax Reform

On December 28, 2018, the Colombian government enacted a new tax reform bill that decreases the general corporate tax rate from 33% to 30% by 2022, phases out the presumptive tax system by 2021, increases withholding tax rates on payments abroad for various services, and taxes indirect transfers of Colombian assets, among other things. Deferred tax assets and liabilities were adjusted to the new tax rates; however, the adjustments to the valuation allowance fully offset the impact to tax expense.